Thoughts on the Merge and Regulation

Merge Update

If you recall, several potential catalysts for this year were highlighted during our 2022 preview. A major one was the proposed transition of Ethereum from its current Proof-of-Work (PoW) to a Proof-of-Stake (PoS) architecture through a process colloquially termed the “Merge.” This is a catalyst that we felt the market was heavily discounting due to Ethereum developers’ track record of delays (Some thought this would take place five years ago).

We have periodically updated clients with the latest happenings related to the Merge. Still, we have not had as conclusive evidence of a move towards completion as the event that transpired yesterday, as Ethereum developers merged the Ropsten Testnet with the Beacon Chain. This could best be considered a dress rehearsal for the Mainnet Merge. By all indications, the undertaking was a success and brought us one step closer to the real thing.

Supply Dynamics Post-Merge

From a fundamentals perspective, if the Merge occurs as planned, the effects on the network will be a (1) reduced issuance rate and (2) an immediate reduction in daily selling pressure.

To elaborate on the points above: